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Weekly Speculative Position: Less dovish ECB not include yet

Summary:
Swiss Franc Speculators were net short CHF in January 2015, shortly before the end of the peg, with 26.4K contracts. Then again in December 2015, when they expected a Fed rate hike, with 25.5K contracts. The biggest short CHF, however, happened in June 2007, when speculators were net short 80K contracts. Shortly after, the U.S. subprime crisis started. The reverse carry trade in form of the Long CHF started and lasted - without some interruptions - until the peg introduction in September 2011. In mid 2011, the long CHF trade became a proper carry trade - and not a reverse carry trade anymore - because investors thought that the SNB would hike rates earlier than the Fed. CHF Speculative Positions Last

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Swiss Franc

Speculators were net short CHF in January 2015, shortly before the end of the peg, with 26.4K contracts. Then again in December 2015, when they expected a Fed rate hike, with 25.5K contracts.

The biggest short CHF, however, happened in June 2007, when speculators were net short 80K contracts. Shortly after, the U.S. subprime crisis started. The carry trade against CHF collapsed.

The reverse carry trade in form of the Long CHF started and lasted - without some interruptions - until the peg introduction in September 2011.

In mid 2011, the long CHF trade became a proper carry trade - and not a reverse carry trade anymore - because investors thought that the SNB would hike rates earlier than the Fed.

CHF Speculative Positions

Last week’s data:

The commitments of traders were released on March 7 before the ECB meeting of March 9.

We expect a considerable re-adjustment of euro and CHF positions.
 

Speculative Positions

Choose Currency

source: Oanda

The net speculative positioning in most of the currency futures did not change very much in the Commitment of Traders reporting week ending March 7. However, there were several significant gross position changes.  The rolling from March to June futures contracts is creating this distortion.

This activity also helps explains another characteristic of the activity.In the euro, yen, sterling and Swiss franc speculators added to both gross longs and gross shorts.  The net speculative position remained short and was mostly little changed.  Sterling was the exception.  There, speculators extended the net short position by 10.8k contracts to 81.4k.

The net short speculative short euro and yen positions are roughly the same size (59.5k contracts and 54.7k contracts respectively).  Yet the gross euro positions are 100k more than the yen’s.  With the 5.8k contract increase, the gross speculative long euro position stands at 137.7k contracts.  The gross long yen position increased by 10.2k contracts to 39.2k.  The gross short euro position edged higher to 197.2k contracts, while the gross short yen position is at 93.9k contracts.

Among the dollar-bloc currency futures, speculators had taken a net long position, and as the speculators rolled, the speculators mostly cut both gross longs and gross shorts, also resulting in only changes in the net positions.  However, there are a couple of exceptions.

First, the Canadian dollar was more like the other non-dollar bloc currencies insofar as speculators added to both gross long and short positions. Second, the 10k contract liquidation of long New Zealand dollar positions overwhelmed the 2.6k reduction in the gross short position.  This resulted in the swing of the net long position back to the short side (4.4k contracts) for the first time since early February.  Speculators treated the Mexican peso like the Australian and New Zealand dollars.  Both gross longs and shorts were reduced.

In the light sweet crude oil futures, speculators cut longs and added to shorts  (8.1k and 8.6k contracts respectively). This resulted in a 16.7k contract reduction of the net long position to 508.6k contracts. The subsequent price action suggests more of the same has taken place.

Speculators were picking a bottom in 10-year Treasury note futures, while the bears took some profits. The gross long position increased by 55.7k contracts to 527.9k.  The gross short position was trimmed by 55.5k contracts to 826.4k.  These adjustments led to a fall in the net short position by 111.k contracts to 298.5k.

7-Mar Commitment of Traders
Net Prior Gross Long Change Gross Short Change
Euro -59.5 -51.2 137.7 -5.9 197.2 2.4
Yen -54.7 -50.0 39.2 10.2 93.9 14.9
Sterling -81.4 -70.7 61.8 18.5 143.3 29.2
Swiss Franc -10.0 -11.8 12.7 9.1 22.7 7.4
C$ 29.2 30.2 65.6 2.5 36.4 3.4
A$ 51.0 51.9 85.2 -10.5 34.2 -9.5
NZ$ -4.4 2.9 27.2 -10.0 31.6 -2.6
Mexican Peso -42.8 -45.8 38.7 -0.4 81.5 -3.4
US Treasuries -298.5 -187.3 527.9 55.7 826.4 -55.5
Crude Oil 508.6 491.9 682.2 -8.1 173.6 8.6
(CFTC,
Bloomberg) Speculative positions in 000’s of contracts
 674.1  182.2

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George Dorgan
George Dorgan (penname) predicted the end of the EUR/CHF peg at the CFA Society and at many occasions on SeekingAlpha.com and on this blog. Several Swiss and international financial advisors support the site. These firms aim to deliver independent advice from the often misleading mainstream of banks and asset managers. George is FinTech entrepreneur, financial author and alternative economist. He speak seven languages fluently.